Campi, Luciano; Polbennikov, Simon; Sbuelz, Alessandro - In: Journal of Economic Dynamics and Control 33 (2009) 1, pp. 93-108
We use equity as the traded primitive for a detailed analysis of systematic default risk. Default is parsimoniously represented by equity value hitting the zero barrier so that, unlike in reduced-form models, the explicit linkage to the firm's capital structure is preserved, but, unlike in...